Vietnam Airlines relaunches sell-off

Hanoi - Vietnam Airlines, seen by some foreign investors as a “crown jewel”
among the country’s disparate state-owned enterprises, is relaunching its
long-stalled privatisation plan and hopes to complete a partial initial public
offering by 2012.

“We will restart our equitisation part-privatisation process because we see the market
has recovered,” Pham Ngoc Minh, the flag-carrier’s chief executive, told the
Financial Times.

The airline, which wants to emulate the success of regional rivals Singapore
Airlines and Thai Airways International, is “still looking for the best time to
do an IPO” and will be watching the market reaction to the forthcoming share
sale by Garuda, Indonesia’s state-owned carrier.

“We will see Garuda as a case study and we will learn from them,” he
said.

Vietnam Airlines has not yet agreed with the government how big a stake to
sell off but it has started looking for international IPO advisers, Mr Minh
added.

In 2008, the government approved Vietnam Airlines’ plan to sell off 20-30
per cent of its equity via an IPO, including the sale of a 10-20 per cent stake
to strategic foreign investors. But, as with other large state-owned
enterprises, the plan was shelved after the global financial turmoil and a
domestic inflation crisis led to a collapse on Vietnam’s embryonic stock
market.

Although demand for air travel and Vietnam’s stock market have recovered
since then, any IPO will face fresh challenges including renewed macro-economic
instability and reduced risk appetite among investors following the recent
foreign debt default by Vinashin, a state-owned shipbuilder.

Two large state-owned companies, oil and gas group PetroVietnam and coal
miner Vinacomin, were unable to complete foreign bond issues last month,
following sovereign debt downgrades from all the main credit rating agencies in
2010.

Mr Minh said his company was a “totally different case” and that Vietnam
Airlines had been able to secure financing for aircraft purchases, even though
the negotiations have taken longer and more banks have been required to back
deals than previously.

He described Vietnam Airlines as a “showcase” for Vietnam’s fast-expanding
economy and expressed his dissatisfaction with the fierce public and press
criticism of state-owned companies that has accompanied the problems at
Vinashin.

“They see the top management of state-owned companies as either
non-professional people or politicians or, even worse, people who are corrupt,”
he said. “I do not appreciate this sort of comment.”